Texas Capital BancShares Inc. (NASDAQ:TCBI) Q2 2019 Earnings Conference Call - Final Transcript
Jul 17, 2019 • 05:00 pm ET
Good afternoon, and welcome to the Texas Capital Bancshares' Second Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode during the presentation. Please note, this event is being recorded. [Operator Instructions]
At this time, I will turn the call over to Heather Worley, Director of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us for the TCBI second quarter 2019 earnings conference call. I'm Heather Worley, Director of Investor Relations.
Before we begin, please be aware that this call will include forward-looking statements that are based on our current expectations of the future results or events. Forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from these statements. Our forward-looking statements are as of the date of this call, and we do not assume any obligation to update or revise them. Statements made on this call should be considered together with the cautionary statements and other information contained in today's earnings release, our most recent annual report on Form 10-K and in subsequent filings with the SEC.
Our speakers for the call today are Keith Cargill, President and CEO; and Julie Anderson, CFO. At the conclusion of our prepared remarks, our operator, Andrea, will facilitate a question-and-answer session.
And, now, I will turn the call over to Keith to begin on Slide 3 of the webcast. Keith?
C. Keith Cargill
Thank you, Heather. Let's begin with Slide 3. The extraordinary volume we drove in the mortgage warehouse produced strong net income for Q2, despite the effect on NIM. Average mortgage warehouse loans increased 43% from Q1 to Q2. Average mortgage finance loans, including MCA, increased 35% from Q1 2019 and we're up 49% from Q2 2018. Due to a continued imbalance in risk versus reward, which our bankers are facing in the core LHI market, we are gratified to have such a strong market leading position in mortgage finance, allowing us to generate solid net income with excellent credit supported by strong controls. The exceptional mortgage finance results also served to offset the continued intentional reduction in leveraged lending loans as we focus on strengthening our overall loan portfolio.
Net revenue increased 1% from Q1 2019 and was up 8% from Q2 2018. Non-interest expense, similarly, increased 1% from Q1 and 7% from Q2 2018. Net charge-offs to average total LHI of 0.34% from Q2, increase from 0.09% in Q1 2019 and decreased from 0.73% for Q2 2018. Non-accrual loans to total LHI of 0.47% was down from 0.57% in Q1 2019, an increase from 0.37% in Q2 2018.
On Slide 4, we summarized the breakdown of the energy loan portfolio and C&I leveraged loan portfolio. Energy loans make up approximately 6% of total loans or $1.6 billion as compared to 7% and $1.7 billion, respectively, at the end of Q1 2019. Year-over-year energy loans did not grow. Non-accrual energy loans were $61.1 million in Q2 2019 versus $76.7 million in Q1 2019.
Allocated reserves for